Yet read this carefully and you'll pick up an even bigger story. This doesn't look like just Ross v. Mitchell but a battle between the National Security Council and the State Department. Note the strength of the anti-Ross feeling amongst the unnamed officials and ask yourself, "Where are their desks in Washington?"

Then note the quick defense of Ross and dismissal of any tension by his NSC bosses, as well as the "other contacts", also likely to be in the NSC, who defend Ross's Israel line as part of a sensible approach to the "big picture" of the Middle East and Iran.

This is the "inside" part of the headline tension between the US and Israeli Governments. Just as something will have to give --- and someone will have to lose --- in that context, so someone will have to suffer defeat, possibly to the point of resignation, within the Obama Administration. Whether that is Ross or Mitchell will say a lot for which agency gets the upper hand in the Administration's foreign policy, particularly on Israel-Palestine and on Iran.

Since Israeli Prime Minister Benjamin Netanyahu’s tense visit to the White House last week, an intense debate inside the Obama administration about how to proceed with Netanyahu to advance the Middle East peace process has grown more heated, even as Israeli officials are expected to announce they have reached some sort of agreement with Washington as soon as tonight.

Sources say within the inter-agency process, White House Middle East strategist Dennis Ross is staking out a position that Washington needs to be sensitive to Netanyahu’s domestic political constraints including over the issue of building in East Jerusalem in order to not raise new Arab demands, while other officials including some aligned with Middle East peace envoy George Mitchell are arguing Washington needs to hold firm in pressing Netanyahu for written commitments to avoid provocations that imperil Israeli-Palestinian peace talks and to preserve the Obama administration's credibility.

POLITICO spoke with several officials who confirmed the debate and its intensity. Ross did not respond to a query, nor did a spokesman for George Mitchell.

“He [Ross] seems to be far more sensitive to Netanyahu's coalition politics than to U.S. interests,” one U.S. official told POLITICO Saturday. “And he doesn't seem to understand that this has become bigger than Jerusalem but is rather about the credibility of this Administration.”

What some saw as the suggestion of dual loyalties shows how heated the debate has become.

[ROZEN UPDATE: NSC Chief of Staff Denis McDonough fiercely rejected any such suggestion. "The assertion is as false as it is offensive," McDonough said Sunday by email. "Whoever said it has no idea what they are talking about. Dennis Ross's many decades of service speak volumes about his commitment to this country and to our vital interests, and he is a critical part of the President's team."]

Last week, during U.S.-Israeli negotiations during Netanyahu’s visit and subsequent internal U.S. government meetings, the first official said, Ross “was always saying about how far Bibi could go and not go. So by his logic, our objectives and interests were less important than pre-emptive capitulation to what he described as Bibi's coalition's red lines.”

When the U.S. and Israel are seen to publicly diverge on an issue such as East Jerusalem construction, the official characterized Ross's argument as: "the Arabs increase their demands ... therefore we must rush to close gaps ... no matter what the cost to our broader credibility.”

A second official confirmed the broad outlines of the current debate within the administration. Obviously at every stage of the process, the Obama Middle East team faces tactical decisions about what to push for, who to push, how hard to push, he described.

As to which argument best reflects the wishes of the President, the first official said, “As for POTUS, what happens in practice is that POTUS, rightly, gives broad direction. He doesn't, and shouldn't, get bogged down in minutiae. But Dennis uses the minutiae to blur the big picture … And no one asks the question: why, since his approach in the Oslo years was such an abysmal failure, is he back, peddling the same snake oil?”

Other contacts [Editor's Note: almost certainly NSC officials] who have discussed recent U.S.-Israel tensions with Ross say he argues that all parties need to keep focus on the big picture, Iran, and the peace process as being part of a wider U.S. effort to bolster an international and regional alliance including Arab nations and Israel to pressure and isolate Iran.

This is an argument that presumably has resonance with the Netanyahu government. But at the same time, Arab allies tell Washington that Israeli construction in East Jerusalem inflames their publics and breeds despair and makes it hard for them to work even indirectly and quietly with Israel on Iran. They push Washington to show it can manage Israel and to get an Israeli-Palestinian peace process going that would facilitate regional cooperation on Iran.

I'm not a big fan of General David Petraeus' interference in US foreign policymaking, given his challenge to (and potential undermining) of his President on an issue such as Afghanistan, but Mark Perry in Foreign Policy offered a tale where Petraeus' manoeuvres may lead to a significant --- and, I think, productive --- re-alignment in US foreign policy.

To be blunt, if you take a charitable interpretation of Petraeus' move (he was telling the US diplomats to get out of their dead end of caving to Israeli steps such as settlement expansion) rather than the cynical one (he was again seeking to expand his authority), this may open up a prospect --- limited but visible --- of the US staking out a position where it can challenge Israel's unilateral obstacles to the peace process.

On Jan. 16, two days after a killer earthquake hit Haiti, a team of senior military officers from the U.S. Central Command (responsible for overseeing American security interests in the Middle East), arrived at the Pentagon to brief Joint Chiefs of Staff Chairman Adm. Michael Mullen on the Israeli-Palestinian conflict.

The team had been dispatched by CENTCOM commander Gen. David Petraeus to underline his growing worries at the lack of progress in resolving the issue. The 33-slide, 45-minute PowerPoint briefing stunned Mullen. The briefers reported that there was a growing perception among Arab leaders that the U.S. was incapable of standing up to Israel, that CENTCOM's mostly Arab constituency was losing faith in American promises, that Israeli intransigence on the Israeli-Palestinian conflict was jeopardizing U.S. standing in the region, and that Mitchell himself was (as a senior Pentagon officer later bluntly described it) "too old, too slow ... and too late."

The January Mullen briefing was unprecedented. No previous CENTCOM commander had ever expressed himself on what is essentially a political issue; which is why the briefers were careful to tell Mullen that their conclusions followed from a December 2009 tour of the region where, on Petraeus's instructions, they spoke to senior Arab leaders. "Everywhere they went, the message was pretty humbling," a Pentagon officer familiar with the briefing says. "America was not only viewed as weak, but its military posture in the region was eroding." But Petraeus wasn't finished: two days after the Mullen briefing, Petraeus sent a paper to the White House requesting that the West Bank and Gaza (which, with Israel, is a part of the European Command -- or EUCOM), be made a part of his area of operations. Petraeus's reason was straightforward: with U.S. troops deployed in Iraq and Afghanistan, the U.S. military had to be perceived by Arab leaders as engaged in the region's most troublesome conflict.

[UPDATE: A senior military officer denied Sunday that Petraeus sent a paper to the White House.

"CENTCOM did have a team brief the CJCS on concerns revolving around the Palestinian issue, and CENTCOM did propose a UCP change, but to CJCS, not to the WH," the officer said via email. "GEN Petraeus was not certain what might have been conveyed to the WH (if anything) from that brief to CJCS."

The Mullen briefing and Petraeus's request hit the White House like a bombshell. While Petraeus's request that CENTCOM be expanded to include the Palestinians was denied ("it was dead on arrival," a Pentagon officer confirms), the Obama administration decided it would redouble its efforts -- pressing Israel once again on the settlements issue, sending Mitchell on a visit to a number of Arab capitals and dispatching Mullen for a carefully arranged meeting with the chief of the Israeli General Staff, Lt. General Gabi Ashkenazi. While the American press speculated that Mullen's trip focused on Iran, the JCS Chairman actually carried a blunt, and tough, message on the Israeli-Palestinian conflict: that Israel had to see its conflict with the Palestinians "in a larger, regional, context" -- as having a direct impact on America's status in the region. Certainly, it was thought, Israel would get the message.

Israel didn't. When Vice President Joe Biden was embarrassed by an Israeli announcement that the Netanyahu government was building 1,600 new homes in East Jerusalem, the administration reacted. But no one was more outraged than Biden who, according to the Israeli daily Yedioth Ahronoth, engaged in a private, and angry, exchange with the Israeli Prime Minister. Not surprisingly, what Biden told Netanyahu reflected the importance the administration attached to Petraeus's Mullen briefing: "This is starting to get dangerous for us," Biden reportedly told Netanyahu. "What you're doing here undermines the security of our troops who are fighting in Iraq, Afghanistan and Pakistan. That endangers us and it endangers regional peace." Yedioth Ahronothwent on to report: "The vice president told his Israeli hosts that since many people in the Muslim world perceived a connection between Israel's actions and US policy, any decision about construction that undermines Palestinian rights in East Jerusalem could have an impact on the personal safety of American troops fighting against Islamic terrorism." The message couldn't be plainer: Israel's intransigence could cost American lives.

There are important and powerful lobbies in America: the NRA, the American Medical Association, the lawyers -- and the Israeli lobby. But no lobby is as important, or as powerful, as the U.S. military. While commentators and pundits might reflect that Joe Biden's trip to Israel has forever shifted America's relationship with its erstwhile ally in the region, the real break came in January, when David Petraeus sent a briefing team to the Pentagon with a stark warning: America's relationship with Israel is important, but not as important as the lives of America's soldiers. Maybe Israel gets the message now.

On Friday, U.S. Secretary of State Hillary Clinton bombarded the Israeli government in an interview with CNN. She said Israel's announcement of new construction of homes in a Jewish neighborhood in East Jerusalem was "insulting" to the United States. She continued:

I mean, it was just really a very unfortunate and difficult moment for everyone -- the United States, our vice president who had gone to reassert our strong support for Israeli security -- and I regret deeply that that occurred and made that known.

She had words for Prime Minister Benjamin Netanyahu as well, "He is the prime minister. Like the president or secretary of state ... ultimately, you are responsible."

State Department spokesman P.J. Crowley added: "The secretary said she could not understand how this happened, particularly in light of the United States' strong commitment to Israel's security."

Then the Quartet (United Nations, U.S., Russia and European Union) condemned Israel in a statement:

The Quartet condemns Israel's decision to advance planning for new housing units in east Jerusalem. The Quartet has agreed to closely monitor developments in Jerusalem and to keep under consideration additional steps that may be required to address the situation on the ground.

Unilateral action by the Israelis or Palestinians cannot prejudge the outcome of (peace) negotiations and will not be recognized by the international community.

The Quartet will take full stock of the situation at its meeting in Moscow on March 19.

Following Clinton's warnings, a Palestinian official told London-based Arabic newspaper Al-Quds Al-Arabi that U.S. Middle East envoy George Mitchell, in a telephone conversation, promised Palestinian Authority's leader Mahmoud Abbas that the US will bring a halt to Israeli building in East Jerusalem.

Interpretatation? The US wants Abbas at the table, even if it is only for "proximity talks". To achieve that, Washington has to get Israel to back away from the provocative announcement of the extra homes in East Jerusalem.

On Thursday, U.S. Mideast envoy George Mitchell spoke with Abbas and urged him not to walk away from indirect peace negotiations with Israel. Prime Minister Benjamin Netanyahu said he believes indirect talks with the Palestinian Authority will continue as planned early next week despite the crisis. State Department spokesman P.J. Crowley added:

I don't think that that report that's been circulating for the last 24 hours is accurate," Crowley said. "As far as I know, we are still moving forward. We have not heard from the Palestinians that they have pulled out.

Before US Vice President Joe Biden left for Jordan, he said in Tel Aviv University the US was interested in “putting everything back on the rails.” However, the Palestinian Authority’s chief negotiator, Saeb Erekat said that the PA would start the indirect talks “if Mitchell informs us that the Israeli plan has been canceled.

Following Biden's golden statement in Tel Aviv University, saying that the US has no other friend like Israel, in an interview with Haaretz, Shas chairman and Interior Minister Eli Yishai who authorized 1,600 housing units in East Jerusalem emphasized the "unique relationship" with Washington. He said:

Our relationship with the Americans is above all else. It is an alliance that has survived complicated periods, and I had no intention of harming those ties, or to challenge the American administration, or to present obstacles to this important visit by the Vice President.

On Friday, with anticipation of renewed Jerusalem riots in response to a recent government decision to expand settlements in East Jerusalem, Defense Minister Ehud Barak ordered Israeli Defense Forces to impose a general closure on the West Bank, preventing Palestinians from entering Israel. The West Bank will be sealed off for 48 hours.

Later on Wednesday, Arab League chief Amr Moussa said that Palestinian President Mahmoud Abbas haddeclared he would not enter indirect talks with Israel. The situation was still unclear on Thursday, but statements coming from the region now put the "proximity talks" at the edge of a cliff.

Although US Vice President Joe Biden condemned the announcement of the construction of new 1,600 housing units in East Jerusalem and questioned Israel's "trustability" on Tuesday, he stated two days later that the "proximity talks" could continue.

Speaking at Tel Aviv University, Biden said Palestinians had misunderstood Israel's announcement of the settlement plan, thinking that building would begin immediately. With no construction scheduled for now, he said, negotiators would have time to "resolve this and other outstanding issues."